ombudsman news

issue 79

September/October 2009

motor insurance - disputes about the quality of repairs and the non-disclosure of vehicle modifications

As we noted in our last annual review, motor insurance is the second most-complained-about area of general insurance after payment protection insurance (PPI). A sizeable number of the motor insurance complaints we see concern the quality of repairs carried out following an accident.

Generally, the insurer is responsible for the quality of such work if the policy says that the insurer will arrange the repair - or if, in practice, this is what happens. If the policy simply offers to reimburse the consumer for the cost of the repair - and the consumer arranges that repair - then the insurer is not responsible for any failings in the quality of work undertaken.

Some disputes involving motor repairs arise from disagreements about the cause of the damage, for example, did all the damage result from the accident (in which case it is the insurer's responsibility to sort it all out) - or did some of the damage come about because of wear and tear or an earlier accident- When deciding such disputes, we will need to consider the evidence to decide the most likely cause of the damage.

Sometimes the insurer has refused to pay a claim because it says the consumer failed to disclose that the vehicle had been modified. In such cases we look at what questions the insurer asked - at the time the consumer applied for the policy - to try to establish whether there had been any modifications to a vehicle. We will also consider whether any non-disclosure on the part of the consumer was material to the claim and the extent to which the non-disclosure was deliberate, reckless or inadvertent.

issue 79 index of case studies

79/8 - consumer complains of poor standard of work by motor insurer's repairer after her car was involved in an accident

79/9 - consumer dissatisfied with quality of work provided by insurer's repairer after car accident

79/10 - insurer refuses to pay claim for theft of car because consumer had not disclosed the modifications made to his vehicle

79/11 - insurer refuses to pay claim for theft of car because consumer had not disclosed the modifications made to his vehicle

79/06motor insurer rejects claim for repair on grounds that damage resulted from "normal wear and tear"

Mr K's insurer arranged for one of its approved repairers to carry out some remedial work on his car, after it was involved in an accident. When the car was returned to him, Mr K was concerned to find it had developed a strange creaking noise.

At the insurer's request, the repairer took the car back for inspection but was unable to establish what was causing the problem. The insurer then asked an independent motor engineer to inspect the car. He, too, was unable to say what was causing the creaking noise. Finally, the insurer suggested that Mr K should ask his local car dealer to try to pinpoint the cause of the problem.

The dealer told Mr K the noise was related to damage sustained in the accident, so he agreed it should carry out additional repairs to resolve the matter. The bill for this work came to £1,616.58. Mr K settled up with the garage and then put in a claim.

He was very surprised when the insurer refused to reimburse him. It told him he should have obtained its approval before having the work done. And it said that, in the view of the independent motor engineer, the damage his dealer had rectified was not caused by the accident but had come about through "normal wear and tear". It was therefore not covered by the policy.

Mr K strongly disputed this and the insurer eventually offered him £400 as "a gesture of goodwill". However, it refused to pay him more than this, so Mr K brought his complaint to us.

complaint upheldWe agreed with the insurer that Mr K should have obtained its approval before asking his dealer to carry out the additional work. However, the main issue here was whether the damage put right by the dealer had been caused by the accident, or through normal wear and tear.

The report prepared for the insurer by the independent engineer did not seem to us to be particularly conclusive. However, it appeared to indicate that it was more likely than not that the creaking arose because of the accident. We therefore upheld the complaint and said the fair and reasonable outcome was for the insurer to reimburse Mr K for the cost of the additional work.

Mrs G asked her insurer if she could get her car repaired by her local dealer, after the car's offside rear body panel and door were badly damaged in an accident. However, the insurer said it would arrange for one of its approved repairers to carry out the necessary work. She later told us she had been assured that the quality of the workmanship would be "as good" as that provided by her local dealer - and the parts and materials used would be "of the same high standard".

Unfortunately, Mrs G was not at all happy with the quality of the repair work. And she complained to her insurer that additional damage had appeared, in the form of scratch marks that had not been present before the car went in for repair.

Although the insurer arranged for its approved repairer to carry out further remedial work, the scratch marks were still evident when the car was returned to Mrs G. And she established that the paint used for the re-spray was not "dealership-approved", as it was required to be under the terms of the paintwork warranty she held with the dealer.

The insurer was at first reluctant to accept that Mrs G still had any grounds for complaint. Eventually, it agreed that the paint had not been of the required standard and it offered Mrs G £100 compensation. She thought this inadequate, as she had asked the insurer to pay for the whole car to be re-sprayed. She therefore referred the complaint to us.

complaint upheldWe found the standard of the work carried out by the insurer's repairer was very poor - and we did not think the insurer had treated Mrs G fairly when dealing with her claim.

We said the insurer should pay for the repair work to be rectified at a car-body shop approved by Mrs G's dealer. The work would be inspected when completed and would include removing the paintwork from the affected areas and re-spraying those areas using dealer-approved paint. The rest of the car would be machine-buffed and polished with a paint-protection lacquer to seal the paint and provide a high-gloss finish.

In view of the distress and inconvenience caused by the insurer's poor handling of the claim, we said it should also pay Mrs G £200.

79/08consumer complains of poor standard of work by motor insurer's repairer after her car was involved in an accident

Mrs J had an accident while driving home from work one evening. Her car was badly damaged and the necessary repair work was carried out by a repairer approved by her insurer. However, when the car was returned to her, Mrs J complained that the brakes and clutch appeared to be faulty.

She told the insurer this must have been the result of damage caused while the car was being repaired. She was unable to produce any evidence of this, but the insurer agreed to cover the cost of additional repair work, as a gesture of goodwill.

Soon after this work was completed, Mrs J asked her local garage to carry out repairs to the car's braking system, suspension and tyres - at a total cost of £1,778.

She then put in a claim for this amount to her insurer. She said that problems had persisted even after the car had gone back to the insurer's repairer for a second time. She said she had lost faith in the repairer's ability to do the work to an acceptable standard, so had asked her local garage to "get the car back to the condition it had been in before the accident".

Mrs J said her garage had "confirmed" that all the work it had carried out on the car was related to the accident - and that the cost would be covered by her policy. However, the insurer refused to meet the claim. Mrs J then came to us.

complaint not upheldMrs J told us the insurer's repairer had "not made a proper assessment of the structural and mechanical damage" and had "failed to restore the car to its pre-accident condition". She said the extent of the work her own garage had subsequently carried out "proved" that the initial repair job had not been done properly.

We looked at the details of Mrs J's claim for the additional repairs. We also examined the report prepared after the accident by an engineer appointed by the insurer. We found nothing to back up Mrs J's assertion that the damage had not been properly assessed at the outset. And there was nothing to suggest that the work subsequently carried out by Mrs J's garage was related to damage sustained in the accident.

As Mrs J had insisted that her garage "confirmed" its work was related to the accident, we asked her to obtain a report from the garage. She told us this was not possible. In the absence of any evidence to support her claim, we did not uphold her complaint.

79/09consumer dissatisfied with quality of work provided by insurer's repairer after car accident

Mr A was very dissatisfied with the standard of the repairs carried out on his car after it was damaged in an accident. The insurer said it would arrange for its approved repairer to take the car in again and carry out further work. However, Mr A said he had no confidence that the repairer would complete the work successfully.

So after arranging an inspection of the car and agreeing details of the work still outstanding, the insurer said it would pay for Mr A's local garage to carry out these remaining repairs.

Once the work was completed, Mr A settled the bill and put in a claim to the insurer. However, it refused to reimburse him for the full amount. It pointed out that one of the items on the invoice related to repairs to the car bonnet - and this was not on the list of outstanding repairs that it had agreed.

Mr A argued that the insurer was liable to meet the cost of all the repairs, as they all related to the accident. The insurer did not agree, so Mr A brought the dispute to us.

complaint not upheldThe insurer had agreed with Mr A that the original repairs were not completed to an acceptable standard. And it had responded to his concerns by agreeing to pay for an alternative repairer - of his choosing - to put matters right.

Before the additional work was undertaken, the insurer had asked one of its technicians and a representative of Mr A's local garage to inspect the car together and produce a detailed list of the outstanding work. We thought it unlikely that any damage to the car's bonnet would have been overlooked - either during this inspection or when Mr A checked through the list before agreeing it with the insurer.

But in any event, we found no evidence to suggest that the bonnet of the car had been damaged in the accident. We therefore agreed that the insurer should not reimburse Mr A for this part of his claim.

79/10insurer refuses to pay claim for theft of car because consumer had not disclosed the modifications made to his vehicle

Mr T's car was stolen from the street where he parked it while he was visiting his local gym. He put in a claim under his motor policy and later told us he was "totally shocked" when his insurer refused to pay out.

The insurer said it was clear from the information Mr T provided in his claim that the car had been modified. However, he had never notified the insurer of any modifications and he had answered "no", when asked on the proposal form if he had modified or altered the car.

The insurer had therefore "voided" his policy (in effect treating it as though it had never existed) and it told Mr T he was not covered for the theft. Mr T complained that he was being treated unfairly, but the insurer would not alter its view, so he came to us.

complaint upheldMr T confirmed that he had added "a satnav unit, Bluetooth kit, Playstation and CD changer". However, he said he regarded these as "simple additions, not modifications".

We looked at the proposal form that Mr T had completed when applying for his policy. This included a question headed "Modifications", asking if there had been "any changes to the engine, plus any cosmetic changes to the bodywork, suspension, wheels or brakes". Mr T had answered "no".

We accepted the insurer's point that the changes Mr T had made could well have made his car more attractive to thieves. However, there was nothing on the proposal form to indicate that it considered changes of this type to be "modifications". We did not see that Mr T could reasonably have been expected to know, from the examples given by the insurer, that he should have answered "yes" to the question about modifications.

We upheld the complaint and said the insurer should settle the claim in line with the usual terms and conditions of the policy. We said it should also add interest, from the date when the car was stolen to the date when the claim was settled.

79/11insurer refuses to pay claim for theft of car because consumer had not disclosed the modifications made to his vehicle

Mr C returned from a short business trip to find his car had been stolen from the side-road where he usually parked it, close to his house. He rang the insurer to report the theft and, while confirming the details, he mentioned that several modifications had been made to the car.

The insurer was not aware that the car had been modified in any way. It told Mr C it would never have offered him insurance if it had known about the modifications. It declared his policy "void" and rejected his claim. Very unhappy with this outcome, Mr C brought his complaint to us.

complaint upheldMr C accepted that he had made a number of changes to his car - but he disputed the insurer's view that these changes amounted to "modifications".

We looked at what the insurer had said about modifications when Mr C applied for his policy. He had completed his application online and we noted that there was a clearly-worded section asking for details of any modifications. Applicants were told to phone the insurer if they were at all unsure about the type of information they were required to provide in this section.

We then checked what Mr C had told the insurer when he reported the theft of his car. The insurer's recording of the call showed that Mr C had not had any difficulty understanding the question when asked if his car had "any modifications". He had responded by detailing all the changes that had been made to his car. We therefore concluded that he had been aware these changes amounted to modifications and that he had failed to disclose them when he applied for his policy.

The insurer argued that Mr C's failure to disclose the modifications was a "material fact"- in other words, something that would influence an underwriter when deciding whether to offer insurance in a particular case, and the terms and conditions that should apply.

In cases where a consumer "deliberately" or "recklessly" fails to disclose a material fact, the insurer is able to "void" the policy (treat it as if it never existed). But if the non-disclosure was "innocent" or "inadvertent", then the insurer should re-write the insurance on the terms it would have offered - if it had known all the facts.

When we asked the insurer to provide evidence of the approach it would have adopted, if it had known the full facts in this case, it sent us a copy of its underwriting manual. This indicated that if the insurer had known about the modifications, it would still have offered to cover Mr C, but it would have increased the premium by 75%.

We had found no evidence to suggest that Mr C had acted "deliberately" or "recklessly" in failing to disclose the modifications - and we concluded that his non-disclosure was "inadvertent". The premium he had paid was only a proportion of the full amount he would have paid - if the insurer had known all the facts. So we said the insurer should pay part of Mr C's claim to reflect the proportion of the (correct) premium that he had actually paid.